Inflation is still no problem for the French and German economies, although it is for the ECB

Signs of a future increase in inflationIn the medium term, the path that inflation will follow is uncertain

Link Securities | The German Federal Office of Statistics, Destatis, announced  that consumer price index (CPI) rose 0.2% in Germany in June compared to May, while the yoy rate rose 1.6% (1.4% in May). Both figures coincide with the preliminary figures published in the middle of the month, as well as with analysts´ expectations.

To note that the yoy CPI growth rate is the second highest so far this year. The harmonised CPI rose 0.2% in June compared to May and 1.5% yoy (1.3% in May). Both figures exceeded the preliminary figures, which were 0.1% and 1.3% respectively. These latter figures were those expected by analysts.

To note that the acceleration in inflation in June was largely due to the increase in the prices of food (1.2% compared to 0.9% in May), of clothing and shoes (1.6% vs 1.2%) and of leisure and culture (2.2% vs -1.5%). The evolution of energy prices weighs in the contrary sense (3.1% vs 3.8%). Excluding energy and food prices, the underlying CPI in June rose 1.6% (1.3% in May).

Valuation: despite the recovery of inflation and underlying inflation in June, both remain far from the ECB target of close to 2%, to whom they provide a good excuse to act, using new measures of non-conventional expansionary monetary policy.

The French National Statistics Institute, Insee, yesterday announced that the consumer price index (CPI) in France rose 0.2% in June compared to May, while the interannual rate rose 1.2% (0.9% in May). Both figures were in line with the preliminary figures and with analysts´ expectations. In turn, the harmonised CPI rose in France in June 0.3% compared to May, while the interannual rate rose 1.4% (1.1% in May). Both figures were again similar to the preliminary data and in line with analysts´ expectations.

The recovery in the interannual CPI rate in France was largely the result of inflation in food (2.6% vs 2.3% in May) and services (1.2% vs 0.6%. On the other hand, the growth rate of prices for manufactured goods remained negative in June (-0.7%), while energy prices fell back (2.4% vs 3.4%), in both cases weighing in the inflation performance for the month.

Valuation: just as in Germany, inflation is still not a problem for the French economy, although it is for the ECB, which has shown itself incapable of driving it towards its target of around 2%.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.